Govt plans to boost setting up of biomass power plants

November 10, 2016 — INDOLINK Consulting (es)

Source: The Economic Times, Nov 10, 2016

NEW DELHI: There is a renewed interest in biomass power plants, which can not only generate electricity but also help dispose of — in a carbon-neutral manner — agriculture waste, burning of which in Punjab and Haryana is partly blamed for the alarming levels of pollution Delhi is experiencing.

Minister of New and Renewable Energy Piyush Goyal held a meeting of top officials on Monday to consider increasing incentives to boost this segment. “We are thinking of a scheme to encourage setting up of biomass plants using agricultural waste, but I cannot say anything more at the moment,” said Santosh Vaidya, joint secretary at the Ministry of New and Renewable Energy (MNRE), told ET.

The government already provides financial assistance of Rs 20 lakh per MW for setting up biomass power plants, and Rs 15 lakh per MW for co-generation projects by sugar mills (using sugarcane waste left over after juice extraction). Such plants cost around Rs 4.5-6 crore per MW, while generation expense is around Rs 3.25-4.00 per kwH. They are also entitled to concessional import and excise duties while acquiring equipment, as well as a tax holiday for 10 years.

But unlike sun and wind energy, this segment has been languishing in India. At the end of 2015-16, the country’s total biomass power installed capacity (along with co-generation units) was 4831.33 MW, with another 1150 MW under construction. Capacity addition has in fact slowed in the past three years, from 465.6 MW in 2012-13 to 412.5 MW in 2013-14, 405 MW in 2014-15 and 400 MW in 2015-16. Barring Karnataka, Maharashtra, Tamil Nadu, Uttarakhand and Uttar Pradesh, no state added any biomass power or co-generation capacity in the last fiscal year. Rather, leading players like Orient Green Power have been trying hard to sell off their biomass power assets, as they are not profitable.

Punjab has an biomass power and co-generation installed capacity of 155.5 MW, of which around 62.5 MW are in operation. In Haryana, the capacity is 45.3 MW. “The Environmental Pollution (Prevention and Control) Authority (EPCA) has been urging the Punjab and Haryana governments to set up biomass power plants since 2008 as one of the solutions to Delhi’s pollution crisis,” said Polash Mukerjee, researcher at the Centre for Science and Environment. “A target of 600 MW of installed capacity was set for Punjab years ago, but without any timeline. It has since been revised to 500 MW by 2020.”

Six more biogas power plants are under construction in Punjab which on completion will raise effective the capacity to 110 MW from 62.5 MW. “But even after these are completed, they will use up only around 1 million tonne of agricultural waste, which is just 5% of the 20 million tonne Punjab produces,” said Mukerjee. Haryana has not added a single MW of biomass power for the past three years.

The main reason for biomass power’s stagnation is that for many years the feed-in tariff offered by the states for biomass power was too low. Thus banks and financial institutions were wary of lending for biomass projects. Another big hurdle has been the absence of a regular supply chain, since agricultural waste is readily available only during the two or three post-harvest months after which it becomes increasingly expensive. The fragmented nature of farming in India also makes collection of waste difficult.

“Some states have been offering better tariffs of late, but the industry itself needs to see a revival,” said S Venkatachalam, the president of the Indian Biomass Power Association as well the chief executive of Orient Green Power. “More funding is needed to set up new plants. The MNRE had said it would provide subsidised loans for working capital but it needs to be done soon. There also needs to be better aggregation of agriculture waste with more collection centres.”

Indeed, an MNRE document briefing for potential investors itself warns that there are “many barriers and risks in project development” in this segment.

Ironically, Punjab and Haryana are among the best-paying states for biomass power today, both having tariffs of more than Rs 5 per kwH. “Today, the tariff for biomass in Punjab is as attractive as for wind and solar,” said Mukerjee of the Centre for Science and Environment.